Flexo’s Investment Portfolio, 4Q 2009

Yes, you can time the market. The S&P 500 benchmark provided an admittedly handsome 27.76% annual return in 2009. However, if you invested in a diversified index mutual fund when the market was at its low point in March more than when it recovered towards the end of the year, you probably beat the market. When the market was at or near its lowest point earlier in 2009, I invested in the market as much as possible with my 2008 SEP and Roth IRAs.

These purchases paid off well in 2009. The Vanguard Total Stock Market Index in my Roth IRA was my biggest winner judged by percentage simply because I invested $4,000 in March and $1,000 in April. Now that the stock market has mostly recovered, I’m nervous about my next investment moves. While I am investing with a distant time horizon within my retirement accounts, when it comes to my IRAs I like to try to ensure I’m getting a good deal.

My 401(k) on the other hand is on auto-pilot, investing a percentage of my salary every two weeks regardless of the market’s situation. This coming year I’d like to change aspects of my 401(k). First of all, I haven’t rebalanced my portfolio in a long time. But before I rebalance, I need to decide whether my investment allocation is appropriate. My contributions are allocated between a large cap value stock mutual fund, a large cap growth stock mutual fund, an international stock mutual fund, and a commercial real estate fund. The company’s matching contributions are split into two sections. The first half invests solely in company stock, though that can be sold and rebalanced within the portfolio, and the second half invests in the same allocations as my portions.

While this combination has performed well for me recently, the funds are more expensive than index funds. There is an index fund available in my 401(k), so that may be a better choice from the long term than the large cap funds.

Here are my investment account balances and performance numbers as of the end of 2009.

It looks like I wasn’t the only one in March who thought “Can things get much worse in the stock market?” I invested pretty heavily in March through June cause healthy companies were just way to low – lower than their actual worth.

Boy is that comment going to come back to bite you in the butt this year.

Congrats Flexo on your market timing! However, I do have a question for you — were you smart enough to get out in 2008 before the big drop? For you and anyone else who missed that sign I’d argue you should all be pretty nervous right about now. The rally has all but come to an end, and if you couldn’t see the big drop the first time, what makes you think you’ll see it this time?

Newbie here, please help me out. I get that your YTD AARR is just your (4th qtr ’09 – 4th qtr ’08)/(4th qtr ’08). But, how does that handle monthly contributions to your 401k? I’m assuming you are still contributing to some of these accounts? I haven’t found a good way to account for that, which forces me to keep excel spreadsheets and calculate xirr. How are you handling this in your spreadsheet above?

The Average Annual Rate of Return is Quicken’s version of Excel’s XIRR function in that they take the timing of cash flows into account. So the AARR is *not* simply the increase in value of the account expressed as a percentage of last year’s value. And for this chart I used the full year AARR not just the 4Q for a fairer comparison with the S&P benchmark (not that that really matters).

I have a similar story to yours, except mine is more luck than skill. I opened my Roth IRA this year at Vanguard, with $1000 in the STAR fund. I put $1000 more in February, and at the beginning of March, my $2000 had fallen to $1800. I decided, since I eventually wanted to get into the Total Stock Fund, to put $1200 in, to boost the total to $3000 and move it over. I ended up with an XIRR of over 60%, with a gross return of 43%.

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